The Fallacy That Blockchain Is Stuck in One Place

gepubliceerd op

Feb 11, 2019

by Coindesk | gepubliceerd op

Coinage

Consider Abra's new product offering: a non-custodial wallet that uses the bitcoin blockchain to allow investors to get fractionalized exposure to the price movements of real-world capital market assets such as stocks, bonds and ETFs, all with as little as $5 down.

The service combines smart contracts, price feeds, and automated, on-chain execution to allow short-term price bets to be rolled over or settled in bitcoin without Abra taking custody of private keys or assets, according to the company.

All the legal, regulatory and intermediation costs that go into protecting people's rights in existing derivatives contracts, with multiple middlemen, lawyers and compliance officers taking their cut, are absorbed instead by the consensus-driven decentralized network running the blockchain.

The combination of the Internet of Things and non-fungible tokens means that a wider array of assets, whether physical goods or digital products, will soon be given tradable digital representation.

Abra-style contracts could allow efficient hedging mechanisms and synthetic investment strategies to evolve around what is an almost endless array of assets.

What you still need, of course, are exchanges that match buyers and sellers of the underlying assets so that they enjoy efficient and effective price discovery.

The problem is that investors have until now had to trust retail exchanges with custody of their crypto assets.

Arwen's tech offers further validation for the development of "Layer 2" solutions that revolve around the combination of smart contracts, multi-signature lock-ups of assets, and "Atomic swaps." Other ideas for decentralized asset trading are being developed on top the Lightning Network and by projects such as the Komodo Platform.

Add to these advances the work on security token offerings, or STOs, by the likes of Polymath, Swarm and Securrency and we can start to imagine a future in which fractionalized claims of any size on mainstream, real-world assets are traded in a peer-to-peer manner and settled in real-time with very low risk.

Just as it would have been wrong to assume that the Internet's usability would forever be confined by the snail pace of 14.4 kbps dial-up modems, so too is it misguided to assume that blockchain technology is stuck in one place.